Each couple must decide whether their relationship and individual circumstances warrant entering into such an agreement. For this reason, it is important that they consider the factors that would be impacted by their decision.
For your own self-knowledge, we’d like to share several factors to consider—plus a few reasons why clients have approached us to assist them with preparing a marital agreement.
1. Second Marriages and Blended Families: A large number of our prenuptial clients are entering into second marriages and have children from their first marriage. In these scenarios, couples want to modify the default rules under the California Family Code and identify specific rights and obligations they have to each other and agreements regarding the care and support of each other’s children. A marital agreement can help with this.
In addition, Estate Planning can be another useful tool in these scenarios; however, depending upon your specific needs, estate planning alone may not be enough.
2. Later Marriage: Based on news reports, more people are entering into marriage and beginning their families later in life. This means that people are amassing more separate property, both assets and debts, before marriage. This also increases the likelihood that someone has received an inheritance prior to marrying. We have assisted a number of clients who want to clearly define what their separate property is, and who want to waive reimbursement rights—which is the right to be compensated during a dissolution proceeding— if their future community property benefits either parties’ separate property, or vice versa.
3. Waiving Community Property: Many couples, for their own personal reasons, want to continue managing their relationship finances as if they were in a dating relationship. They do not want to create joint accounts; they do not want to accumulate community property. That is completely fine and something that a marital agreement can easily help you achieve.
4. Anticipation of Dissolution: Property agreements cannot promote dissolution of a marriage. The purpose of a property agreement is to clearly enumerate rights and responsibilities in the marriage, and facilitate a happy and healthy marriage. Even with this public policy position, it is wonderful that our society is erasing the stigma around divorces. It is important that people feel empowered to enter into healthy, loving relationships, and leave those that are no longer best for both parties.
Some couples feel it is important for them to agree to waive spousal support in the event of dissolution. If this scenario applies to you, it is critical that both parties are represented by counsel. The California courts have held that a party cannot waive their right to spousal support if they do not have an attorney. Further, your counsel will be able to inform you that these agreements are not always upheld by the courts, and why. In this situation, waivers of spousal supports can be found to be unconscionable based upon the facts present at the time of dissolution. Waivers of spousal support can be desirable when both parties are high income earners with independent ability to support themselves or if there are anticipated inheritances.
5. Debts: As mentioned above, with later marriages or second marriages, it is not uncommon for one party to have significantly more debt than the other. If all income created during marriage is going to be community property, then the spouse paying down their debt will be doing so with money that half belongs to you as well. With the creation of a prenuptial agreement, you’ll be able to clearly define the debts, the payment terms, and the responsibilities regarding protecting the other party from accidentally acquiring liability for those debt—all within the agreement.
6. Business Ownership: If you own a business, either entirely or in part, marital agreements can specifically help address management and responsibilities related to a separate property business. California Family Code states that a spouse has a claim to the time, talent, and efforts one party exerts to benefit their separate property, which includes separate property business ownership. This can create many unanticipated consequences down the road, including a divorce. A premarital agreement can protect your separate property business during divorce, as well as clarify the rights and responsibilities during marriage.
7. Deepening the Relationship: Talking about money is hard. When people are happy and looking forward to their future, people often don’t think about having conversations that can be uncomfortable. Having a good team supporting you through these conversations can be a huge benefit to a couple. There is a clearing and setting of expectations that occurs with these conversations.
Couples are also guided through different things to consider; if a couple wants to choose not to create community property, then how will the couple handle finances in an emergency situation, or if one of the individuals is injured and can no longer work? Discussing these topics and utilizing attorneys or a mediator to help you do so can be very beneficial.
If you’d like to learn more about marital agreements, feel free to contact Gomez Edwards Law Group in Santa Clara, CA. Our email is firstname.lastname@example.org or call (408) 413-2100.